Transcript The global and Australian funds management industry

Setting Priorities for Services Trade Reform
- Financial services priorities
The Australian National University: 30 November 2008
John O’Shaughnessy, Deputy CEO, IFSA
The agenda
o Understanding financial service exports
o The global and Australian funds industry
o The opportunity
o What’s a ‘funds hub’?
o Why Australia?
o Recent activities
o Next steps
Understanding financial service exports
The Four Modes:
o Cross-border supply
• Management / administration and advisory services provided by
Australian enterprises
o Consumption abroad
• Australians consuming abroad
o Commercial presence
• Establishing subsidiaries / branch offices / joint-ventures
o Movement of natural persons
• Exporting talent
The global and Australian funds management industry
o Global FM growth is being driven by ageing populations in mature and
developing economies. Accelerated by commitments to properly fund DB
schemes
o Australia has the 4th largest funds pool (now $1.3 trillion). It grew 32% in
‘06
o Australia is being outpaced by Lux (38%), Ireland (60%), HK (54%).
Singapore (32%)
o Regional growth estimate by Cerulli is 14% for next decade. Much
greater than Nth America and Europe. Highest growth to 2010 is China
(60%) and India (70%)
Growth in managed funds, GDP
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Dollars ($) - millions, current prices
sourced from ABS catalogues: • 5206.0 Australian National Accounts: National Income, Expenditure and Product, Dec 2006
• 5655.0 Managed Funds, Australia, Dec 2006
Total consolidated assets (left axis)
Gross domestic product (right axis)
…despite the fact that over 20% of funds are
invested overseas by Australian managers
Funds invested in and from overseas sources, 1996 to 2006
source: ABS
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Percentage (%) of funds
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Assets sourced from overseas
Assets invested overseas
Trade balance in managed investment US, UK and Australia
The opportunity
o Managing Australian / regional / global funds
o Fund administration services
o Professional services
o Advice services
o Capital to stimulate new and growing business opportunities
o Employment opportunities
Access Economics estimates
Extract from Access Economics – The Export Potential of Australian Funds Management Services, July 2007
Typical funds management revenues as a % of FUM
Funds under management as a % of GDP, 2005
What is a ‘funds hub’?
A centre of expertise and that provides regional and global services including:
o Asset management
o Custodial services
o Investment consulting
o Platform delivery systems, wrap accounts and master trusts
o Financial service IT (including software development)
o Actuarial services
o Legal and accounting services
o Complience and risk monitoring services
o Investment performance and research
o Education and training services
o Portfolio administration services
o Distribution and advices models and services
‘Hub’ competition - the alternatives?
Why Australia?
o Strength and stability of our economy
o Strength of the industry – high domestic growth – scale is important
• 4th largest
• Finance & Insurance = 7.2% of GDP with growth 40% faster than nominal
GDP (to Q4 ’06)
• Well respected industry that includes most leading global players
o Expertise and innovation
• Experienced managers of global portfolios – Dec ’06 Chant West Multimanager report shows 38% of funds invested in global portfolios
• Portfolio diversity, REITs, infrastructure funds, financial planning, hedge
funds, private capital, investment platforms, retirement savings, etc
Continued…..
Why Australia?
o Well respected regulatory system
• Integrity, transparency and efficiency
• Corporations Act, MIA, FSRA
• ASIC, APRA, ATO, Austrade
o Talent pool
• Highly skilled and multilingual
o Good exec and specialist training ground
o Right time zone / technology reach
o Quality of life
……continued
Some recent activities
o Established industry focus group in 2005
o Engagement with interested stakeholders
• ASR, Regulators, DFAT, Austrade, Invest Australia & Axiss
• Raised financial services opportunities as part of trade discussions /
developments
o Assessment of recent and activity and future opportunities
• Identifying data and information gaps
o Led off-shore delegations and encouraged on-shore delegations
o Published specific policy recommendations
• Refinements to Managed Investments Tax and International Tax arrangements
o Commissioned studies on ‘export’ potential and recommendations on the issues
More info at: http://www.ifsa.com.au
What next?
o Contribute to and participate in AFMET
“And for this reason I can announce today that Labor in Government will
establish an Australian Funds Management Export Taskforce (AFMET) with
costs to be absorbed from Departmental resources.”
Kevin Rudd, ‘Australia as a Funds Management Hub for Asia’ 3 August 2006
o Simplify and get more certainty into taxes on managed investments, including FIF,
foreign sourced income, withholding tax, etc.
o Gain higher profile in multi-lateral and bi-lateral trade agreements
o Ensure that DTAs include negotiated positions on cross-border taxes
o Better promote Australia’s capability and competence
o Better understand the competitive landscape
o Encourage further studies into the financial services sector trade potential and
issues
Some recent quotes ………..
Kevin Rudd at the National Press Club – 21/11/07
“I was just having a conversation with someone before, I'll leave them unnamed in
case it embarrasses them, but they were from the National Australia Bank
[laughter] that's a big bank, could be anybody, about this simple proposition, which
is, you've heard me speak quite a lot, and the Treasurer has taken objection to
this, about how you go about transforming our financial services sector into an
export platform to the rest of the world.
Now it's a very sophisticated sector, our funds management sector is particularly of
great depth and breadth and density, and I've always asked myself the question,
why can't we project this into the region as a major new export business for the
nation?
In taking that further, both in terms of the taxation arrangements, which we've
already indicated, the reduction of the foreign withholding tax, but also in how we
re-badge and re-brand Australia as a funds management capital for wider East
Asia. We've just been talking about how we'd do that consultatively with the peak
bodies, like IFSA, the Bankers' Association, and the other peak bodies. The only
way you deliver good outcomes here is if you do it consultatively, and I very much
believe in a Team Australia approach.”
Some recent quotes ………..
Kevin Rudd on Australia as a financial centre – 19/11/07
JOURNALIST: “Mr Rudd, on costing, will you do more on financial services? That’s
a very modest proposal of $15 million withholding tax total. You want to create an
export industry, how will you do that? What else will you do?”
RUDD: “There’s about three things you can do. You say it’s modest, but my
experience was based on long conversations with IFSA, the Financial Services
Association, and particularly the funds management section within it - on what they
needed in order to become globally competitive and becoming a new export
platform for the country and that’s what I’m interested in. So we have actually
developed that proposal in close consultation with the funds management industry
and it’s benchmarked against parallel withholding taxes around the world.”
“So you know what I’ll be doing?
Putting together the funds management industry and the financial services sector
and delegations to the region with me and relevant Ministers leading those
delegations to market ourselves as a funds management capital in east-Asia into
the future.”
Thank you